On the eve of migrating to Nasdaq, Neobank Inter hits 20 million clients in Brazil

May 31, 2022
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Helena Caldeira, the company's CFO, highlights organic growth and customer relationship maturation as pillars for 2022

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Inter (BIDI11) has just reached the 20 million client mark, a few weeks before migrating its shares to the US technology exchange Nasdaq. The expectation is to maintain the pace of expansion recorded in 2021, opening another 4 million accounts by the end of the year.

"The strength of growth comes from Inter's good value delivery. We offer fair services that solve the customer's problem with an app in the palm of their hand. A very large percentage of our base is promoters of the business, and a good part of the flow [of new clients] comes more from 'word of mouth' than from an outreach effort," said Helena Caldeira, the company's CFO, in an interview with EXAME Invest. Inter's NPS, which measures customer satisfaction, is 83 - one of the highest in the banking sector.

For 2022, the company's strategy is to broaden its focus. On the one hand, the acquisition of new clients continues to be a relevant pillar, especially considering that Inter still has a small market share compared to its peers in relevant segments of the banking system, such as credit consession.

On the other hand, the digital bank is starting to look closer to home, in a positioning that Caldeira describes as "maturing the relationship with customers.

The expectation is to increase engagement with the current base, responding to one of the main concerns of the market in relation to the company: to understand which strategy Inter will use to make its operation profitable. According to data from the first quarter, 55% of Inter's clients are active, that is, they generate some form of revenue for the bank - via transactions, loans, or purchases in the market place. The other 45% is the challenge for 2022.

"It is natural that Inter will take some time to activate new customers. The tendency is that the base will become more mature and the engagement will increase as we build the relationship with the client," said Caldeira.

One of the bank's bets is cross-selling, offering financial and non-financial products on a single platform. It is worth remembering that Inter is a pioneer in launching a marketplace within a banking product.

It is possible, however, that the challenging macroeconomic moment will hamper Inter's plans. While the digital bank's customer base rose 82% in the first quarter year-on-year, active customers are growing at a slower pace, 68% in the same time frame. The mismatch can be explained by the turbulence in the stock markets after escalating interest rates and inflation. The consequence is a more conservative approach by Inter in credit card management and loan origination - making it harder for customers to engage with these products.

The digital bank's strategy to protect itself from the macro hurdle is risk and revenue diversification. Inter's largest sources of revenue are from cards, which represent 29% of the total, followed by a 27% share of float (revenue via current account) and 19% from the marketplace.

Still, the shares are suffering on the stock exchange. Inter's units have already fallen 81% since their peak in July last year, when they were traded at around R$ 82. Since then, the basic interest rate, Selic, has jumped to double digits, making investors more fearful. Inter closed the last trading session with a price of R$ 12.90 and is the paper with the worst performance of Ibovespa in the year.

Migration to Nasdaq

Although negative, Inter's repricing may help the bank in its next big step: winning new investors abroad. "Being at a 'discounted' price can be attractive to the investor who is hearing the Inter story for the first time. If we had very stretched multiples, it would not be considered a good entry point in this market moment of stock market instability," argues the CFO.

Inter begins trading its shares on the Nasdaq technology exchange on June 23. The objective of the migration is to facilitate access to capital, which is more abundant in the foreign economy and stock markets. The financing focuses on the long term, aiming both to expand Inter's credit area and to take advantage of possible consolidation opportunities. "The structure in the US has a greater flexibility that is important for Inter's future. It leaves the company better positioned to grow," said Caldeira.

The plans also include migrating part of the operation to the United States. In January of this year, the company acquired the North American fintech USEND, which operates in the service of remittances between countries, with a focus on Brazilians living abroad. The plans are to integrate, in the second half of the year, Inter's banking operations with what is already offered by USEND. The company also intends to offer a global dollar account service for Brazilian investors interested in internationalization.

By the way, the first step taken towards offering products abroad is in the migration of Inter itself: the company's shares and units will be converted into BDRs as of June 17. But those who want to trade directly on the American stock exchange can opt to exchange their BDRs for shares listed on Nasdaq. In this case, it is necessary to have an account with a broker that operates abroad. Not by chance, Inter is one of the institutions that offers this service.

Las opiniones compartidas y expresadas por los analistas son libres e independientes, y de ellas son responsables sus autores. No reflejan ni comprometen el pensamiento u opinión de Latam Fintech Hub, por lo cual no pueden ser interpretadas como recomendaciones emitidas por la platafomra. Esta plataforma es un espacio abierto para promover la diversidad de puntos de vista sobre el ecosistema Fintech.

Inter (BIDI11) has just reached the 20 million client mark, a few weeks before migrating its shares to the US technology exchange Nasdaq. The expectation is to maintain the pace of expansion recorded in 2021, opening another 4 million accounts by the end of the year.

"The strength of growth comes from Inter's good value delivery. We offer fair services that solve the customer's problem with an app in the palm of their hand. A very large percentage of our base is promoters of the business, and a good part of the flow [of new clients] comes more from 'word of mouth' than from an outreach effort," said Helena Caldeira, the company's CFO, in an interview with EXAME Invest. Inter's NPS, which measures customer satisfaction, is 83 - one of the highest in the banking sector.

For 2022, the company's strategy is to broaden its focus. On the one hand, the acquisition of new clients continues to be a relevant pillar, especially considering that Inter still has a small market share compared to its peers in relevant segments of the banking system, such as credit consession.

On the other hand, the digital bank is starting to look closer to home, in a positioning that Caldeira describes as "maturing the relationship with customers.

The expectation is to increase engagement with the current base, responding to one of the main concerns of the market in relation to the company: to understand which strategy Inter will use to make its operation profitable. According to data from the first quarter, 55% of Inter's clients are active, that is, they generate some form of revenue for the bank - via transactions, loans, or purchases in the market place. The other 45% is the challenge for 2022.

"It is natural that Inter will take some time to activate new customers. The tendency is that the base will become more mature and the engagement will increase as we build the relationship with the client," said Caldeira.

One of the bank's bets is cross-selling, offering financial and non-financial products on a single platform. It is worth remembering that Inter is a pioneer in launching a marketplace within a banking product.

It is possible, however, that the challenging macroeconomic moment will hamper Inter's plans. While the digital bank's customer base rose 82% in the first quarter year-on-year, active customers are growing at a slower pace, 68% in the same time frame. The mismatch can be explained by the turbulence in the stock markets after escalating interest rates and inflation. The consequence is a more conservative approach by Inter in credit card management and loan origination - making it harder for customers to engage with these products.

The digital bank's strategy to protect itself from the macro hurdle is risk and revenue diversification. Inter's largest sources of revenue are from cards, which represent 29% of the total, followed by a 27% share of float (revenue via current account) and 19% from the marketplace.

Still, the shares are suffering on the stock exchange. Inter's units have already fallen 81% since their peak in July last year, when they were traded at around R$ 82. Since then, the basic interest rate, Selic, has jumped to double digits, making investors more fearful. Inter closed the last trading session with a price of R$ 12.90 and is the paper with the worst performance of Ibovespa in the year.

Migration to Nasdaq

Although negative, Inter's repricing may help the bank in its next big step: winning new investors abroad. "Being at a 'discounted' price can be attractive to the investor who is hearing the Inter story for the first time. If we had very stretched multiples, it would not be considered a good entry point in this market moment of stock market instability," argues the CFO.

Inter begins trading its shares on the Nasdaq technology exchange on June 23. The objective of the migration is to facilitate access to capital, which is more abundant in the foreign economy and stock markets. The financing focuses on the long term, aiming both to expand Inter's credit area and to take advantage of possible consolidation opportunities. "The structure in the US has a greater flexibility that is important for Inter's future. It leaves the company better positioned to grow," said Caldeira.

The plans also include migrating part of the operation to the United States. In January of this year, the company acquired the North American fintech USEND, which operates in the service of remittances between countries, with a focus on Brazilians living abroad. The plans are to integrate, in the second half of the year, Inter's banking operations with what is already offered by USEND. The company also intends to offer a global dollar account service for Brazilian investors interested in internationalization.

By the way, the first step taken towards offering products abroad is in the migration of Inter itself: the company's shares and units will be converted into BDRs as of June 17. But those who want to trade directly on the American stock exchange can opt to exchange their BDRs for shares listed on Nasdaq. In this case, it is necessary to have an account with a broker that operates abroad. Not by chance, Inter is one of the institutions that offers this service.

Las opiniones compartidas y expresadas por los analistas son libres e independientes, y solamente sus autores son responsables de ellas. No reflejan ni comprometen el pensamiento o la opinión del equipo de Latam Fintech Hub y, por lo tanto, no pueden interpretarse como recomendaciones emitidas por la plataforma. Esta plataforma es un espacio abierto para promover la diversidad de puntos de vista en el ecosistema Fintech.
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